The story of how an Odessa adventurer swindled the Kyiv community for the Dniprovskyi Department Store, and then sold it to a foreign investor. The answer to the question of why foreign investors in Ukraine are a living hell (based on a business case).
This text is simply a description of the court's ordeal, which anyone can read in the Register of Court Decisions. We decided to publish it for one reason.
It turns out that our raiders and officials devise complex schemes to rob the Kyiv community, but a simple legal maneuver is all it takes to rip off a visiting investor. And it works—and it works—like a charm.
The story begins back in 2007. The then head of the Dnipro District Council approved a list of municipal properties subject to privatization, leasing the non-residential premises of the Dnipro Department Store with an option to purchase to an unremarkable public organization, the European Partnership Regional Development Agency.
The chairman and founding father of this citizens' association was a certain Alexander Efimovich Ryazhev, infamous in Odessa as businessman "Benya," who had previously been accused of attempting a raid on the building of the Odessa "Oblpotrebsoyuz" (Regional Consumer Union), as well as of lightly beating up Odessan vacationers on the "Zebra" beach, which he controlled.
However, Kyiv officials were unfazed by the fact that these premises were owned by CJSC Dneprovsky Department Store, which had employed a workforce of thirty salespeople since the days of socialism. Immediately after the lease was signed, unidentified hooligans smashed the store's glass display cases and splashed paint on the retail space. Then, in the parking lot next to the store, the chairman of the board of CJSC Dneprovsky Department Store was beaten by Caucasians. The district prosecutor's office attempted to appeal this unusual decision of the district authorities in court, but after losing the trial in 2009, it abandoned its pursuit of justice. Subsequently, CJSC Dneprovsky Department Store also lost all legal battles to Bena and subsequently went bankrupt.
Since these actions left the department store premises in disrepair, the European Partnership NGO carried out an expensive renovation and purchased it from the district for next to nothing in July 2009. The lingering smell of paint and the scale of the major renovations to the Benya building have been impressing Kyiv residents for seven years now (photo of the reconstructed department store at 39 Andrei Malyshko Street, Kyiv, taken from Google Maps).
Meanwhile, "Benya" didn't even think about such trivial matters as paying land tax to the budget. The District Administrative Court, in case No. 2a-9699/10/2670 of November 3, 2010, ruled to collect the tax debt in the amount of UAH 110077,30 from the assets of the European Partnership NGO. But by a strange coincidence, an administrative seizure of assets was not applied to this debtor, which made it possible to subsequently sell 77/100 of the department store premises to a representative of a foreign investor.
In July 2011, Oleksandr Yefimovich Ryazhev, as the head of the European Partnership NGO, sold 77% of his shares of non-residential premises with a total area of 1,444.40 square meters at 39 Malyshko Andrei Street to Trading House Dneprovsky LLC, a representative of a foreign investor and European company, for almost 6 million hryvnia. It all began, as usual, with Benya, as the head of a non-profit public organization, asking for $200,000 in cash on the day of signing the contract, and allowing the official payment under the contract of 5,99 million hryvnias to be made within 12 months of the contract's execution. However, the contract did not specify the account number of the European Partnership NGO to which the buyer was required to transfer the funds. Incidentally, Ryazhev readily accepted the cash at the time of the transaction, assuring that he would soon send an official letter with the bank details of his public organization for the transfer of the official portion of the payment under the contract.
For some reason, further communication between the investor and Benya didn't work out. Benya had disappeared, and the buyer had sent numerous reminder letters to his NGO asking him to finally provide his bank details. If Ryazhev's partner had been Ukrainian, he would have long ago suspected something was wrong. However, Europeans are like children.
And yet, a child is a child, but after a few years the investor finally saw the light.
In January 2014, "Benya" Ryazhev left the NGO "European Partnership," signing it over to "pounds," or front men from among Ukraine's low-income citizens. Ryazhev also resigned from his honorary position as president of the NGO, replacing himself with marginalized individuals.
In December 2014, the Kyiv Commercial Court accepted a claim filed by the European Partnership NGO against Dneprovsky Trading House LLC to terminate the purchase and sale agreement for the Dneprovsky department store. The judges of the trial and appellate courts were unanimous in their opinion: the agreement was valid and the claim should be dismissed. However, the Higher Commercial Court of Ukraine overturned these decisions, sending the case back to the Kyiv Commercial Court, stating that the foreign investor was required to deposit this amount with a notary, and that the trial and appellate courts allegedly overlooked this important fact. Furthermore, a flaw in Ukrainian legislation is that without the seller's bank details, the buyer has no way to contact a notary to close the transaction.
At the time of the transaction, the non-residential premises were in poor condition. After the property was acquired by a foreign investor, it was renovated at considerable expense. Therefore, Ryazhev deliberately violated the terms of the contract, confident that he would reclaim the department store, which had been renovated by "suckers," through our courts.
Of course, completely by chance, this long-suffering case was assigned to Judge T.M. Vashchenko in the Kyiv Commercial Court and is currently under her review.
On July 5, 2011, the High Council of Justice of Ukraine issued Decision No. 472/0/15-11 against Judge Vashchenko for her violations of current legislation regarding the recognition of lease and sale agreements for municipal land plots as concluded, as proposed by the plaintiffs. In other words, she had previously entered into agreements for the alienation of municipal property without a Kyiv City Council decision, and judging by the supervisory authority's interest in her, she had done so more than once.
Moreover, on August 27, 2013, at a meeting of the High Qualification Commission of Judges of Ukraine, a decision was made to recommend Judge Vashchenko's transfer to the position of judge of the Odessa Commercial Court of Appeal, closer to Benya.
At the same time, Judge Vaschenko is under pressure from the supervising SBU officer, who convinces her of the need to make a knowingly unjust decision in favor of the Odessa raider Ryazhev.
Judging by the way the legal battle is unfolding, the final verdict will one day be rendered by the Court of God. Until then, the investor's fate is bleak.
Whether the investor will be able to protect their property rights remains to be seen. There are some doubts about this. But what can be said for certain is that Europeans will not come to invest in Ukraine again. However, experience comes at a price. Especially if the lessons are taught by Ukrainian "judges and patrons."
Igor Alekseev, for ORD
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